Policy Options for Reducing Transportation Energy Use and Greenhouse Gas Emissions

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1 Policy Options for Reducing Transportation Energy Use and Greenhouse Gas Emissions TRB Special Report 307 July 13, 2011 Presented by: Emil Frankel, Study Committee Chair Director, Transportation, Bipartisan Policy Center

2 Requested by TRB Executive Committee Charge: Examine Policy Challenges and Opportunities Associated with Reducing Energy and GHGs from US Transportation Over Several Decades Emphasis on Policies that Can be Implemented Over Time to Affect Trends in Sector Energy Use and Emissions Review Pros/Cons of Major Regulatory, Pricing, and Public Investment Policy Options Aimed at: Reducing Energy- and Emissions-Intensive Transport Activity Increasing Vehicle and System Efficiency Reducing GHG-intensity of Transportation Energy Sources

3 Technology neutral. We did not examine the kinds of technologies that may emerge as result of policies considered. Did not try to quantify all of the cost impacts that may be incurred from alternative policies, such as safety, national economic and equity impacts, and transportation finance effects Did not examine energy/emissions savings actions in other sectors and other regions of the world, which will affect how much savings are needed from transportation and how fast. Not possible to review every single design variant and combination of policy options (simply too many variations and combinations) In not having this total picture we were not in a position to recommend specific policy actions. Thus, our more modest goal was to further inform decision-making at the strategic level, not to prescribe it.

4 16-member committee with expertise in: Transportation operations and management Vehicle and fuel technologies Economics and policy analysis Balanced committee led to many lively and thoughtprovoking discussions difficult to capture in the report. Met 7 times over 2 years. Invited many experts to brief the committee from industry, academia, and government

5 Transportation relies almost exclusively on petroleum fuels, accounting for 70% of nation s petroleum use Securing the world s oil supplies is costly to US Oil price volatility is disruptive to economy and increases private sector risk of investing in alternatives Costly environmental consequences, from local air pollution to oil spills Petroleum fuels are carbon-rich, accounting for >25% of energy sector s emissions of CO 2 Scientists contend 50% to 80% reduction in GHGs needed by midcentury Given the scale of needed CO 2 reductions, transportation will need to play a meaningful role in achieving them. While economy-wide actions to reduce GHG emissions (e.g., carbon pricing) are generally viewed as more efficient, sector-specific policies may be warranted to make early progress

6 CO 2 Emissions from U.S. Energy- Using Sectors

7 Transportation Dominates Total U.S. Petroleum Consumption

8 Reversing trends in energy use will require: Focus on major modes Cars/light trucks, freight trucks, and aviation Account for nearly all passenger and freight activity will continue to account for the lion s share for decades Other modes contribute very little to energy use/emissions These modes may prove to be helpful as solutions Affecting both demand and supply Increase consumer demand for and manufacturer supply of efficient vehicles Enable more efficient transportation system operations Reduce demand for energy-intensive forms of travel Boost consumer demand for and producer supply of lower-ghg fuels (in life cycle terms)

9 Implications Cannot rely solely on mandates for the supply of efficient vehicles and low-ghg fuels. Must also induce user demand for efficient vehicles and fuels. Must finds way to both encourage and enable the use of less energy-intensive forms of travel and/or alternatives to energy-intensive travel.

10 Policy Options Considered: Their Advantages Fuel Taxes (higher fuel prices) --Induces both consumer and supplier interest in vehicle efficiency --Motivates interest in reducing energy-intensive travel activity --Will prompt consumer demand for more efficient systems --Induces interest in alternative energy sources Vehicle Efficiency Standards --Compels development and supply of more efficient vehicles Low-Carbon Fuel Standards --Motivates innovation in the development and supply of low-carbon fuels

11 Policy Options Considered: Their Advantages (cont.) Land Use/Transportation Coordination --Better enables consumer reductions in energy-intensive travel activity (e.g., more travel alternatives) Public Investments in Infrastructure and More Efficient System Operations --Reduces congestion to increase system energy efficiency --Valued by consumers when fuel prices are rising

12 Policy Challenges/Questions Fuel Taxes Higher prices very noticeable. How to gain political acceptance over time? Vehicle Efficiency and Low-Carbon Fuel Standards How far can technology forcing go without consumer demand? How to motivate more consumers to demand the more efficient products? Conversely, how to induce consumers to refrain from buying the least efficient products?

13 Policy Challenges/Questions Land Use/Transportation Coordination How to generate policy action by the thousands of local communities responsible for land use planning? How to speed up the impacts on urban form? Public Investments in Infrastructure/Operations Latent demand? Will smoother-running system lead to even more energy-intensive travel activity?

14 Summary of Policy Advantages and Challenges Policy Options Advantages Challenges Fuel tax Exerts broad influence on - Amount of transport -Vehicle & system efficiency -GHG content of fuels How to gain acceptance? How to sustain support for raising taxes overtime? Efficiency standards Track record of implementation Potential to have early influence on vehicle efficiency Will consumers buy the vehicles? Can standards be developed for trucks, aircraft, and ships? Land use/travel demand management Complementary to other goals such as livability and congestion reduction How to convince thousands of jurisdictions? Will land uses change fast enough?

15 Strategically Combining Policies: Exploit their Strengths and Compensate for their Weaknesses Vehicle and Fuel Efficiency Standards Track record of implementation they offer the potential for early progress Adding feebates may help spur consumer demand for products Fuel taxes Higher fuel prices will motivate consumers to buy efficient vehicles and counter the rebound effect If fuel tax revenues substitute for other taxes, perhaps this can make fuel taxes more palatable Investments in Infrastructure for More Efficient Operations Efficient system is a linchpin to building public support for fuel taxes Land Use/Transportation Coordination May require state/federal incentives for communities Best viewed as longer-term, complementary strategy

16 Summary Message Reducing petroleum use, reducing GHG emissions, and improving system efficiency are highly compatible public interests Reversing trends in transportation energy use and emissions will take time and commitment but early progress is essential A strategic approach to policymaking must consider how best to achieve both timely and expanding reductions in energy use and emissions The policy choices ahead are by no means either/or decisions